Meanwhile, China Moves From Currency Wars To Trade Wars

As markets replay the same identical reaction to the same identical Greek news that we saw back on July 21, 2011 (and we all know where that went), something else entirely and more troubling is going on behind the scenes. Because as the world was transfixed on regurgitated news out of Greece, which will without a shadow of a doubt end up with a far worse 2020 debt/GDP scenario than the IMF's downside case per the sustainability report (first posted in its entirety here on Zero Hedge last night, and which assumes just a 1% decline in Greek 2013 GDP), China just escalated currency wars into outright trade wars. Because as China Daily reports, "Chinese exports are set to get a tax boost." Translated: even as China pushes the CNY higher in infinitesimal and irrelevant increments to appease US Congress, it has just taken out the trade stimulus bazooka. Why? "Export tax rebates will be increased this year in response to an export decline triggered by the European debt crisis. The move, which Commerce Ministry officials said will be implemented when the time is appropriate, will be the first increase since 2009." Still think Europe is fixed? China's answer: nope.

More:

"We are studying the launch of relevant measures" to stabilize export growth, said Zhong Shan, deputy minister of commerce, at the 2012 China Imports and Exports Work Conference held in Nanchang in East China's Jiangxi province on Monday.

"Uncertainty and instability in the global economic scene are growing - there are also some domestic factors," Zhong said.

According to the General Administration of Customs, exports declined 0.5 percent over the year to January, the first fall in more than two years. Officials from the ministry have stated that exports face challenging times.

The last time China proceeded with this measure: when the world was imploding back in 2009.

From 2008 to 2009 when the financial crisis hit, China raised export tax rebates seven times on a wide range of goods.

Tax rebate rates in general were increased to 13.5 percent in 2009 from 9.8 percent before the crisis.

"The situation is getting more severe with a double-digit decline in export growth expected in the first quarter," said Da Jiaxiang, deputy director of the department of commerce in East China's Jiangsu province, one of the nation's top textile exporters.

"We are expecting preferential policies on tax rebates."

And more:

In South China's Guangdong province, a key export region, companies said they were experiencing a difficult time.

As an exporter of Christmas presents, Guangzhou Kingway Gifts felt the consequences of the sluggish global economy as it suffered a 30 percent fall in sales last year.

"Higher export tax rebate rates would help us get through the difficult patch and prevent the hardest-hit from going bankrupt," said Shen Hui, the company's general manager.

Currency policies will also be stabilized, Zhong said, to help companies cope with currency fluctuations.

Our advice to those who have already taken out the Dow 13K hats: enjoy it while it lasts. Because between China promoting its exports and trade balance (which explicitly means others' trade balances are set to be impaired), and gasoline at all time highs for this time of the year, very soon the non-Greece headline driven reality is about to come home to roost.

Finally, and we have shown this before, the only reason why markets have been on a diagonal tear in the past 6 months, is the following simple chart.

Unfortunately, as WTI has demonstrated clearly, the excess liquidity has once again spilled out of stocks and has entered broad commodities. If there is any other faster way to kill a risk rally than soaring energy prices, we have yet to find it.

I'm with you GetZeeGold, besides the catering industry and the banks who get bailed out I can't stand to see any more from comments and I especially can't stand any more staged photographs of that donkey Legarde with Meatloaf (who a poster yesterday referred to as Louis Anderson)-self important inbred twats...all of them!

This isn’t really about Greece at all. It’s about the fundamentally perverse nature of the global economic system that cannot withstand a default or liquidation without bringing down the entire system. Even if China and Japan threw all their FX reserves into bailing out the Eurozone this would merely postpone the systemic breakdown.

That is exactly right... and it is exactly that simple. The creation of money by issuing debt (money = debt in our monetary system) with interest tied to the debt, REQUIRES aggregate debt to constantly expand. Eventually the cost of maintaining debt will bury the productive economy. What goes up, must come down. Symptoms vs. Cause. The subprime meltdown wasn't a cause... it was a symptom. Greece isn't a cause, it's a symptom.

I really hope this happens. One of the worst things to ever have happened to us stupid lazy Americans is the dollar's global reserve status. It gave us purchasing power without earning it. And it made too many of us WAY TOO dependent on our politicians and government. A lot of (illegal) immigrants come to this country ready to bust their ass doing work that too many spoiled Americans shun because we're too goddamned dependent on our government to cut us a check. Fuck that shit. It's time for Americans to get their ass off the couch and labor. Because they'll only wake up when they start paying taxes.

SCHMUCK RACKER- "In the coming months and years and decades(?) people wil learn to do without. Not by choice but of necessity. No money no buy."

Which is by design. It's called nudging the sheeple into the coral/slaughter pen so you can control them when they don't like the way you voted. This has been a attack on freedom and liberty since the creation of the federal reserve to accomplish the goals of the collectivist/socialist/progressive/communists who despise capitalism because capitalism is what give you economic freedom. Ask yourselves this. why in the world would congress take away the seperation of banks and investment firms by repealing glass-steagal? Memebers of congress who do the hokie pokie from government to lobbying to banks to GSE's to Federal Reserve to do away with laws that give them an advantage they couldn't get in the private market or capitalist system. they have to cheat and if you complain the give you the middle finger while saying before congress, "I don't know what happened to the $1.6 Billion your honor. I swear." says Jon Corzine former Democrat Senator, Governor, and drumroll please, Goldman Sachs Alumni. This has alway been about the collectivism vs the individual liberty. Capitalism is what gives you economic liberty over the pathetic losers like Obama and the entire democrat party and over half of the repuclican party members of congress. From Socialized medicine to cap and trade to dodd/frank or glass/steagal. They are controls for you and not government. Please understand this if anything.

I think that most around here at this point wish the Greek people well, but are totally baffled by the Mt. Olympus-sized wave of bullshit washing over the whole sorry "bailout" affair. Call me when something is actually done to tackle the problem (like, say, a voluntary Greek re-adoption of the Drachma).

Is it just me, or is Communist China the epitome of the true Keynesian governance? After all, they run a surplus (OK, a punishingly monster surplus) during most periods. Then when there is an economic downturn, they loosen the purse-strings.

I suspect that Pettis would say that it's not that simple, since their surplus is held in FX reserves, meaning that they have monitized it already, making it unavailable for direct domestic intervention (bank bail-outs, or otherwise).

But really, aside from how the government holds its surplus, isn't this what Keynes wanted all along?

We are in the ironic situation in the West to have in front of us the perfect example where our OWN crazy momentum in first world is leading us : to a China construct...!

Its the model the Oligarchy really craves for! One party system, one Oligarchy controlled global market economy.

Oh, heaven on earth!!!

Only problem, the jobs been taken by that OTHER OLigarchy, the chinese one, not the western one. They got there first, like Amundsen to South Pole...Sheeeeeeet...We will all feel like Shackleton and Scott...beaten to the flag of monopoly 18th hole.

Now will he beat us to North Pole too?? Hells Bells...not that, not that! What will we have left? The North West passage??

But he got there first also...Now we are truly grand slammed and dunked by these jerks. Time to pull the carpet before this dream team of monopoly, one party juggernaut, really gets going...Oh why, oh why ...did we lose China back then in 1949...on why, oh why...(the aulde school of DC Oligarchs cry).

sometimes your posts go over my head but you hit the nail on the head with that one. I'll further your South Pole Explorer metaphor some more, the beach holiday mules that Scott took to Antarctica to haul supplies have been replaced with our modern day donkeys called printing presses (or HFTs, bankers, politicians etc.).

I've always thought that the phrase "multi-national" was terribly misleading. I wish people would simply adopt a more accurate phrase: "trans-national" which incapsulates the situation a little better. What is the Corporation? What are its goals? Not easy questions...

So anyway, the corporate 'model' functions much better when you have a huge underclass to exploit, that much is clear. Manufacturing ain't coming back. These entities are finding a new home now and a regime much more suited to cater to their 'needs'. What's left for the 'developed' West? Nothing. Bullshit concepts like QE and warmongering.

never say never... even in Athens! Old lamps for new! the circle of life is always reborn.

No, what will change is the US corporate paradigm, legacy of hundred year construct; the hyperconsumer age comes to an end, as population/resource constraints impose new ways of human growth. 'Transnationals' I buy, its closer to the truth, since Reaganomics days! Globalisation changed that, undoubtedly. There is NO simper fidelis to home country.

That's because there is no home, or to be accurate, home is Profit-ville.

As far as change goes, I'm not so sure. Hyperconsumerism on it's way out? I see the opposite when I travel, it seems it is being democratized as if it is somehow a right of mankind. Mankind = Creatures and Creators but no longer are we creating in this world but the virtual one -- that is to say: not at all -- yet we remain in this world... for now.

trans-national is really a good description - an entity not bound to any nation

some thoughts on this: a corporation is a legal entity that has some additional legal rights vs. the individual, mostly in the field of the limitations of liabilities (upps! no sorry, I'm a corp)

originally, they were formed by the special grant of the sovereign. now they can't vote yet, but in the US they do set policy, either by funding of campaigns or by lobbying. In any case, they trump the individual, particularly when they reach a "systemic relevance".

which brings me to just another type of entity that has special grants by the sovereign beside the corporations:

banks, special corporations with the additional right of creating credit (another sovereign right). Well, who is the sovereign? In republics, it's you.

everytime some smart hedgie or bankster is allowed to hyperleverage and play, it's with your money. let it marinate...

I like the "trans-" national description, though I often tend towards "faux-" in my thoughts, particularly when watching such gods as Evelyn de Rothschild talking about his "work" in China, and how he en-visions things in the future - then it just seems like those who own the place, go where they like, do whatever they want, and it's up to "us" to adapt to survive. . .

The Chinese are following the Japanese MITI (Ministry of International Trade and Industry) playbook. Technology transfer from the West, protected internal market (except for raw materials, agricultural goods, and oil, of course, no sense in keeping that stuff out), moving up the supply chain, etc. Tax gimmicks are part of the playbook, essentially an inverse tariff, we pay you to send things out. As long as the importing countries shrug and carry on buying Chinese goods, the PRC government will do whatever it can to keep the machines humming.

we think China as smart but it's entirely relative ..relative to just how bloody moronic Western Govts are

China rebuilt simply by its Commie Govt getting out the way of the (slaughtered) private sector and allowing it breathing room to prosper (just as the British 'light touch' did with Hong Kong and Singapore). Freedom works, Govt dictates don't

meanwhile in the West Govts have taken the opposite course of getting in the way of the private sector (power un-checked knows no boundaries) and suffocating it with wealth sapping taxes, hundreds of monopolist competition-killing laws, regulations and policies. Rules do not create order, they create chaos

But here we are again with 'Trade Wars' ...Govts of East and West up to their usual bloated biggoted egos of being social and economic vandals

So true. But all those Chinese government infrastructure projects end up being useful. Huge water projects, pollution cleanup, resource extraction, transportation systems etc. What does our government spend it money on? Entitlements, unions, F22s, aircraft carriers, welfare, bureaucrats, outrageous medical services. At least the Chinese expenditures have a modicum of sanity.

Is there any other trick? Any businessman tries to sell as much as possible. It is the US that doesn't seem to be putting its money back into the business. Only the partners trying to get their money out to pay for their McMansions.

Ask their oligarchs and I'm sure they'll say, "too many". And the one-child policy has created a disproportionate number of young men in the "too many, and disposable" category. Another step towards war... it's a dance... it won't be avoided.

Funny you should bring that up. Just made an offer to an engineer from China. I interviewed about 35 candidates from a pile of over 100. The Americans were not as bright and always asked questions like; "What are my benefits" and "How much paid leave do I get". The person from China obviously actually read the information in his interview packet, where all those details were clearly spelled out.

Krid, the Chinese are by no means inclined to a shooting war; war with one's largest customer and borrower is bad for business. As their Sun Tzu wrote over two millennia ago, a battle is won before it is even fought. As such, the Chinese are already victorious.

Victorious? One fifth of the world's population lives in about one fifth of the land mass of China. China has 50 million young men who will not be able to find a wife thanks to years of infacide because of their one-child policy. The GDP growth that China needs to sustain to simply support their growing population, as they try to maintain this facade in the face of plummeting global demand, is something close to 10% (good luck with that, China). "China" hasn't won sh-t. The top of the Chinese ponzi scheme is getting rich... but the chinese are going to be screwed, just like everyone else. When their peasants wake up... right around the time that our sheeple wake up... their leaders and our leaders will both need a bit of a distraction.

I agree that the war is won before it is fought... I think you have the sides wrong. It's not China vs. the US... you and I have more in common with the average Chinese peasant than we do with the .001% who actually run the show. We are all just pawns.

We have all understood that the only reason for these bailouts (both in America and overseas) is can kicking, meaning buying time in order to either delay the inevitable or to conjure up some miracles.

This can also be seen as a period of time to ready ourselves for the mother of all storm seasons. It stands to reason then that countries would do the same. On the surface this means protecting what you already own. A little reading of history will reveal the playbook.

Precisely, I think this is a big political smokescreen as we have been able to pretty much get whatever price we want for the crops we have been selling to China. I'll let everyone know if an order is suddenly halted or held up. The Chinese have a new-found wealth and they are definitily still spending on foodstuffs that they like or typically have not indulged in before (meat producers are also doing well). Let's see if they re-invest the rest of their wealth in their own people or try to follow the American playbook and have the mother of all military build-ups while their people become unemployable and starve.

thanks for demonstrating the typical idiot response. One thing we grow are pecans, which have a number of very healthy properties. According to one supplier in China, these have been selling for as high as $100 per pound. Bribes are a BIG part of doing business in the BRICs by the way.

Yes, then they employ people to do what the bees do for us over here already. Yeah, that's "winning". But you are correct, when it comes to devaluing currency and lowering standards of living for the working poor, China is #1.

The bee thing is also not really a problem if you are curious. Yes, the pesticides did play somewhat of a role, but the stories about it back in 2008 are kinda bullshit. It got cold, too many bees died and hand pollination ensures a higher yield. Happened again recently with strawberries and other stuff. Happened out in xinjiang too, where fertilizer isn't such a big deal.

Onto the imported pecan trees... yep, we're going a similar route. Our family has control of several unpopulated mountains that are undeveloped. We're turning them into farms. 2 are rather barren, but based on soil analysis it's basically perfect for imported cherry trees. We're also doing pecans, avocados in a greenhouse along with some ruby reds. All of these are premium import crops which means we can undercut the import prices quite easily. It's also free, as the local government is chipping in for our trees as we are "reforesting", part of the deal is that our land is 100% ours to use.

No industry around, no pollution, crystal clear water sources and the area is apparently also gold bearing. All starts up this summer. Fruit trees, high quality tea, mushrooms, 2x10,000 sq m green houses... and we're raising chickens for free natural fertilizer (also eggs and meat), lambs and pigs. Starting to look into some bee hives as well, just to make things simple.

Best of all, there are no local taxes on this, no property taxes, no usage fees, and fuck if I'm going to bother reporting any of this to uncle sam. Family is all pitching in and is local, so no labor costs either and this is a family co-op, so all the wealth we generate enriches the entire family. Fruit tree supply contracts alone, we're looking at around $500k a year in pure profit once that fruit starts coming. None too shabby at all even after splitting it 5 ways. And it means less overpriced imports from the us for everyone else.

Using the GM & Chrysler medicine, Greece lenders couldforgive most of Greek debts and the Central Banks could just print more funny-money compensating Greek debt holders (somewhere at a rate of 20-30%). Early or later, it will be done anyway. The same should go for rest (Italy, Spain, Portugal, etc.,)

Greece will have a "clean" start and, without accumulating new debts, will solve its problems. After all, the Central banks are printing mountains of funny money every single day. However,this solution would drastically reduce the Zionist Banking Mafia strangulation and enslavement of Greek people. From the Mafia point of view, such solution is NOT acceptable.

Strongly dependent on one's definition of the word "profit". Since the final objective is to control people's minds, the whole profit thing remains to be seen. In the end, the people running the show seem to want a system where financial markets are operating under their control, low level wars are continuous but haven't degraded to inturrupt shipping and resulting in commodities barter (something they can't control well from a computer screen), and mindless people run around buying stuff and watching soap operas, reality TV and of course advertisements.

The weird thing is that their money printing has already given them unlimited access to whores, blow, penthouses and big noisy machines that make things blow up, but they just seem to be compulsively needing that next hit of control, not knowing total control is impossible. Nasty addiction those folks have.

The real winners will be the ones that use this as an opportunity to not "find the cheapest" as they have always done, but use it as a free upgrade in quality from manufacturers. The importers who do that will win big as there is a growing desire for durable goods.

U.S. Propaganda: "Buy American" (well, its just one of TPTB slogans and distractions). I've been seeing commercials on MSM and hearing U.S. people regurgitating TPTB mind-wash that we will be going to war with China, because its their fault...

These people spouting this crap have no clue, about anything. It takes a lot of time to change these type of minds. Most of the time I do try to infect their minds with one or two facts...sometimes they talk about it when, and if, we meet again. But, I'm not too hopeful. I try to keep a safe distance so I don't feel their repercussions.

I've decided just to wait for the whole scheme to crash. Then I'll work with the rubble. While protecting myself from the mind-washed sheeple.

All the circle jerking on currency has been quite slow to hit the commodities in my opinion. Perhaps it is just my elevated sensitivity to anything related to money printing that makes me expect every crooked trick will spike gold and oil. If gold starts back rolling up again though, it should wake some people up. It seems to be waking up right now but nobody will notice until 1800 is crisply broken.

Putting the NWO theories aside, I am still not sure how these corporations expected to stay alive other than making big bux in the short term?

You move all of them out of the US, give the US 20% unemployment and low wages and still expect people to pay up and keep buying the shit? One of the conclusions I have is this is the prime mega example of greed at it's finest. WallStreet pushes for higher and higher profit margins, corporations want to meet them and want cheap labor and bail, make a ton in the short term but now long term it's a total race to the bottom. Company X couldn't stick around because Y already left and has 80% better margins so X followed. We are left with a handful of rich assholes who are living for the here and now(because you can't take it with you) and left us all decimated. And now supposedly we have manufacturing companies crying for help. The last job I looked at wanted someone to work from 6am to 6pm 5 days a week and every other saturday for $8.5hr. I hope they don't drug test because you'd have to be a pretty energetic sob to do that kind of gig. If that's what it's coming down to then fuck it im finished. Sorry assholes, we already had a taste of the good life.

Since every asian country I have been to is essentially monocultural and rascist what else can we expect from them besides some type of war (monetary, trade, etc). WE are just mixed race monkeys over here in their eyes.

That is the perception of many countries towards the US. Also, the perception of many Americans towards other countries. I guess that is what happens when you get your perceptions from the TV instead of actually visiting other countries.

As an addendum, the US is a mixed race monkeys country because the country is huge and historically a destination for every disenfranchised dirt poor group in the world. Texas is larger than Germany. Russia has several cultures too. China even had Mongol kings not to mention there are Chinese colonies the world over.

Currency Wars, Trade Wars and Killing Wars are all inevitable because there is no settlement. There will be no possible settlement as long as countries can print away their trade liabilities. The 'Grand Experiment' of a fiat currency World has predetermined massive death and destruction.

Yep. Only a solid baseline global trade currency will work. And that happens to be gold. The world can go back to honest money which serves the economy, or be obliterated by fiat currency that serves only governments and control freaks.

nope. never thought the europeons would "fix" anything or really cared to

they might try to "fix" INSOLVENCY in banking with "swaps" and "liquidity injections" (dexia---wha'happened to dexia, tyler? did i miss it?)
they're "fixing" greece L0L!!
then they will fix their other problems which the probably don't care to "fix" except by printing moMoney to keep various BK entities on the hook to pay the entities who are "allowed" to PRINT money

China's policy mistake, if a major crisis erupts, was to delay restructuring. Without a positive shock to the economy, the government and central bank are caught between the Scylla and Charybdis of major inflation or deflation. In order to stop inflation generated by the Fed's QE policies and slow the internally fueled real estate bubble, the PBOC tightened and the central government clamped down on real estate. Deflation is now settling in. The big question is how bad is the real estate slowdown? If the optimists are right, the sector will stabilize in the second half and central bank easing will help spur growth to offset negative shocks. If it's bad, the PBOC is behind the curve and more serious deflation will follow. Then the money spigots will open and we'll really see some inflation accompanied by currency depreciation (unlike the brief dip in late 2011). Then we may see a China gold frenzy that puts the past two years to shame.

Export incentives, and import disincentives, in China are so huge that a major industry has been built around filling shipping containers with merchandise bound for North America (for example) and sending them off on a container ship. Somewhere, a few miles at sea, the labelling on the shipping container gets switched and it arrives back at another port in China. The company collects the export incentives but sells the product in China.

You know 100 years ago if you had told Europeans the Chinese would be invoking a trade war on the world during a global recession a few swords would be drawn and trumpets of war would start blowing. The nuclear weapon has been the most stabilizing force in global finance I would argue ever. For the advantage that China holds in human capital and other factors the fact that they aren't more bullish is surprising, more power to them. That said, this will clearly push Obama farther away from his free trade ambitions and toward his mercantile labor wing of the democratic party which disappoints me but I was expecting this inevitability with the crisis in Europe.

China's leaders have the advantage of learning from their 2000+ years of actual recorded history. Compare that to the United States' 250 year history.

Their intent to survive is assisted by building on actual experience of what has demonstrably worked and not worked over that period. Their understanding thus pre-empts Western language follies such as misunderstood ideas of "capitalism", "socialism", "competition", "trade war", "currency war", "freedom", "free trade", "survival of the fittest", "profits", financial "derivatives", "corporations", "success", "bully", "bullish", "acquisitive", etc.

Western history is also available for their study.

Their leaders should well know the value of flexibility and long-range planning.